Mountview Estates PLC Annual Report 2006

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FY2006 Annual Report · Mountview Estates PLC

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MOUNTVIEW ESTATES P.L.C.

REPORT AND ACCOUNTS

2006

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CONTENTS

Financial Highlights

Chairman’s Statement

Review of Operations

Directors and Advisors

Report of the Directors

Statement of Directors’ Responsibilities

Corporate Governance

Remuneration Report

Consolidated Income Statement

Group Balance Sheet

Consolidated Statement of Changes in Equity

Consolidated Cash Flow Statement

Notes to the Financial Statements

Independent Auditors Report to the Members of Mountview Estates P.L.C.

Mountview Estates P.L.C. – parent company balance sheet prepared under UK GAAP

Notes to the parent company balance sheet prepared under UK GAAP

Independent Auditors Report to the Members of Mountview Estates P.L.C.
(Parent company prepared under UK GAAP)

Table of Comparative Figures

Notice of Meeting

Shareholders’ Information

Page

4-5

7-9

11-13

14-15

20-35

36-37

39-44

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FINANCIAL HIGHLIGHTS

Turnover (million)

Gross Profit (million)

Profit Before Tax (million)

Shareholders’ Funds (million)

Earnings per share (pence)

Net assets per share

Dividend per share (pence)

2006

2005

47.5

28.1

22.7

143.2

408.4

36.7

130

48.8

31.0

24.8

132.1

445.4

34.5

126

Increase/
(Decrease)
%

(2.7)

(9.4)

(8.5)

8.4

(8.3)

6.4

3.2

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CHAIRMAN’S STATEMENT

In my statement, which accompanied our interim Report, I stated that those Accounts were our first
to be prepared under the new International Financial Reporting Standards. I think it appropriate to
state that these are the first full year’s Accounts to be prepared under the new International
Financial Reporting Standards. The Notes to the Financial Statements detail the changes caused by
these new Standards and I draw your attention to the fact that the figures for year ended 31 March
2005 have been adjusted so as to provide true comparisons.

Opposite are the financial highlights for the year ended 31 March 2006.

At 30 September 2005 our Profit before Taxation was down by almost £3.7 million for the six months
but for the full year to 31 March 2006 it is down by less than £2.2 million. This turnround of more
than £1.5 million and an encouraging start to our new financial year suggest that we have arrested
our decline and may even be able to look forward to profits resuming an upward trend. The last few
months have seen a greater urgency in the market place than had been the case for the previous
eighteen months. In particular the auction rooms have been very busy.

Our rental income continues to hold up well and recently sales revenues have shown renewed
strength. These combined with reduced borrowings and lower interest rates give cause for
optimism. Nevertheless the need for firm financial control continues. The cost of maintaining the
properties, making the necessary improvements to enhance rental income and ensuring that
properties are in optimum condition at the point of sale is always likely to increase because of the
higher expectations of what landlords should provide.

The costs of administering a company and fulfilling its statutory obligations continue to rise and I
believe that we have done well to contain these costs as nearly as we have. Although it may be some
time before we are able to repeat the record profits of two years ago we are now operating at a level
which compares very favourably with the 1990s and with continuing strong financial and internal
controls there is reasonable expectation that profits may ease forward once more.

This has been a difficult year but I believe that we have made the right decisions. My staff and
colleagues have rallied round and I thank them all for their endeavours and I look forward to the
day when increased profits may bring them increased rewards.

Despite the fall in profits your Board is recommending an increased final dividend of 86 pence per
share in respect of the year ended 31 March 2006. This dividend is payable on 21 August 2006 to
shareholders on the Register of Members as at 21 July 2006. This will make a total dividend for the
year ended 31 March 2006 of 130 pence per share which is more than three times covered by the
earnings per share of 408.4 pence.

Last year I made reference to the fact that the Sinclair family has always had substantial
shareholdings in the Company and the family grouping has been interpreted to be acting as a
concert party (“the Concert Party”) for the purposes of the City Code on Takeovers and Mergers. A
new Concert Party Agreement has been signed recently and I can confirm that the Concert Party
now holds nearly 53 per cent of the issued share capital of the Company.

D.M. SINCLAIR
Chairman

18 July 2006

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REVIEW OF OPERATIONS

PROPERTY REVIEW

1. RESIDENTIAL PROPERTIES

The Group’s business model is simple. We are a property trading company, buying tenanted
properties at discount and selling them when they become vacant.

Categories of Property held as trading stock

The Group trades in the following categories:

Rack rent (tenanted residential) units
Ground rent units
Life tenancy units

A unit is a property, however large or small, whether freehold or leasehold, which is held subject to
a single tenancy.

Analysis of the Group trading portfolio by type as at 31 March 2006

Rack Rents
Ground Rents
Life Tenancies

No of units

2,443
1,073
346

Cost
£m

155.60
0.95
19.50

Analysis of the Group Trading portfolio at the lower of cost and estimated net realizable value by
geographical location as at 31 March 2006

Rack Rents Ground Rents Life Tenancies
£m

£m

London (North)

London (South)

Kent, Surrey, Sussex,
Hampshire, I.O.W

Herts, Essex, Beds, Bucks,
Oxon, Camb, Norfolk, Suffolk,
Berks, Middx, Northants

52.0

43.2

20.6

25.3

0.4

0.03

0.1

Remainder of England and Wales

14.5

0.02

Acquisitions

0.2

4.7

6.3

8.1

Portfolio
%

29.8

24.9

14.4

18.1

12.8

The Company’s modus operandi is to buy tenanted residential property and sell it when it becomes
vacant. Regulated investments that are characterised by early possession with rental returns below
market value and high margin on sale are becoming increasingly short in supply. The Group
continues to place more emphasis on the acquisition of life tenancies. Although this type of trading
stock has nominal rental income, the properties are bought at a greater discount to vacant possession
value and have a higher margin on sale. In addition, the maintenance of the property is usually the
responsibility of the life tenant. The Group has made a number of quality residential purchases
during the year, however, the number of units sold exceeds the number of units purchased, mainly
due to the competitive nature of the market.

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REVIEW OF OPERATIONS

During the financial year the Group has sold and purchased the following number of units:

Rack Rents
Ground Rents
Life Tenancies

Rental Income

Sold

180
102
6

£’000

34,620
179
868

Purchased

84
26 (or created)
24

The Company’s rental income is derived from five different sources:

• Regulated tenancies
• Assured tenancies
• Assured shorthold tenancies
• Life tenancies
• Ground rent tenancies

More than ever we continue to target those properties where the rent is capped and expenditure on
improvements and the provision of missing amenities lead to substantial increases in rental income.

2. INVESTMENT PROPERTIES

The analysis of the investment portfolio as at 31 March 2006 is as follows:

Louise Goodwin Limited
A.L.G. Properties Limited

55 units
11 units

All the properties are located in Belsize Park, London NW3.

During the financial year we have disposed of five units.

Mountview Estates P.L.C. purchased the investment companies in 1999. They are the only significant
departures from the Company’s normal activities, and it was believed that the rental income could be
increased to such an extent that the long term holding of the properties could be justified.

Outlook

Over the past 12 months, as a result of market conditions, rental income has not risen in the way we
had anticipated. There is, however, an active owner/occupier purchasing market of which we intend
to take advantage by the sale of units that fall vacant.

Valuation

The properties comprised within the investment portfolio have been revalued internally for the
purposes of these accounts, taking into account the figures produced by the external valuers in 2003
and other local transactions during that time. The value attributed to each individual property reflects
the change in its condition where appropriate and the adjustment resulting from changes in market
circumstances.

Details of the valuation of the investment portfolio are disclosed on page 30.

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DIRECTORS AND ADVISERS

Executive Directors

D.M. Sinclair FCA (Chairman)
Joined the Company as Company Secretary in 1977, became a Director on 1 January 1982 and
succeeded his late father as Chairman on 5 June 1990. Member of the Institute of Chartered
Accountants in England and Wales.

K. Langrish-Smith
Joined the Company in 1974 and became a Director on 1 January 1982.

C. Maunder Taylor FRICS
Joined the Company as a Non-Executive Director in 1990 and became an Executive Director on
1 January 1992. Member of the Royal Institute of Chartered Surveyors.

Miss J.L. Murphy
Joined the Company in 1990 as an assistant to the late Frank Sinclair and became a Director on
1 September 1995.

Mrs. M.M. Bray FCCA
Joined the Company in 1996 and became Company Secretary. Appointed an Executive Director on
1 April 2004. Member of the Association of Chartered Certified Accountants.

Non-Executive Directors

J.P. Hall
Joined the Company as a Non-Executive Director on 1 December 2000.

N.S. Palmer
Joined the Company as a Non-Executive Director on 1 December 2000.

Secretary and Registered Office
Mrs. M.M. Bray FCCA
Mountview House, 151 High Street, Southgate, London N14 6EW

Bankers
HSBC Bank Plc, 27/32 Poultry, London EC2P 2BX
Barclays Bank Plc, One Churchill Place, London E14 5HP

Auditors
Grant Thornton UK LLP
Grant Thornton House
Melton Street
Euston Square
London NW1 2EP

Solicitors
Norton Rose
Kempson House, Camomile Street, London EC3A 7AN

Registrars and Transfer Office
Capita Registrars
Bourne House, 34 Beckenham Road, Beckenham, Kent BR3 4TU

Brokers
Brewin Dolphin Securities Ltd
12 Smithfield Street, London EC1A 9BD

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REPORT OF THE DIRECTORS

The Directors have pleasure in presenting their Sixty-Ninth Annual Report to the Members together
with the Financial Statements for the year ended 31 March 2006.

RESULTS AND DIVIDENDS

The Results for the year are set out in the Income Statement on page 16.

The Directors recommend the payment of a final dividend of 86 pence per share. The dividend
will be paid subject to approval on 21 August 2006 to Ordinary Shareholders on the register at
the close of business on 21 July 2006.

ACTIVITIES

The principal activities of the Company and its Subsidiary undertakings are as follows:

Parent Company

Mountview Estates P.L.C.

Property Dealing

Subsidiary undertakings (wholly owned)

Hurstway Investment Co. Limited
Louise Goodwin Limited
A.L.G. Properties Limited

Property Dealing
Property Investment
Property Investment

REVIEW OF BUSINESS AND PROSPECTS

Details of the Group’s performance during the year and expected future developments are
contained in the Chairman’s Statement and the Review of Operations on pages 4 to 5. In addition
the Group has established the following Financial and Internal Performance Indicators:

Earnings per share
Dividend
Net assets per share

Financial Key Performance Indicators

2006
growth %

(8.3)
3.2
6.4

2005
growth%

(14.1)
3.3
10.2

The Directors do not consider that any non-financial indicators are in existence.

Revenue per member of staff
Administrative expenses as percentage of revenue
Profit before tax per member of staff

ROTATION OF DIRECTORS

Internal Performance Measures

2006
£’000

1,581

6.4%
755

2005
£’000

1,625

6.2%
828

In accordance with the Company’s Articles of Association, Mr. C. Maunder Taylor and Mr. J.P.
Hall retire from the Board by rotation and being eligible, offer themselves for re-appointment.
Motions for their re-appointment will be proposed at the Annual General Meeting.

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REPORT OF THE DIRECTORS

DIRECTORS’ INTERESTS IN SHARE CAPITAL

The number of Ordinary Shares in the Company in which the Directors and their families were
interested is as follows:

31 March
2006

1 April
2005

Ordinary Shares of 5p each

Mr. D.M. Sinclair including the following holdings
Kingsway Wallpaper Stores Limited – nil (2005: 79,350 non-beneficial)
Mr. D.M. Sinclair was a Director of the above company
Sinclair Estates Limited – 54,165 beneficial (2005: 100,000 non-beneficial)
Mr. D.M. Sinclair is a Director of the above company
Viewthorpe Limited – nil (2005: 107,950 non-beneficial)
Mr. D.M. Sinclair was a Director of the above company

534,883

793,911

Mr. K. Langrish-Smith

Mr. C. Maunder Taylor

Miss J.L. Murphy

Mrs. M. M. Bray

Mr. J.P. Hall

221,500

228,250

1,090

1,100

10,187

2,000

800

1,100

10,187

2,000

All the above interests are beneficial except where otherwise stated.

SUBSTANTIAL INTERESTS IN SHARE CAPITAL

As at the date of this Report notices have been received of the following substantial interests in
the capital of the Company:

Ordinary Shares
of 5p each

% of Issued
Share Capital

Mr. Phillip Trevor Wheater FDSGS Acct and
Mrs. Daphne Sinclair and Mr. Alistair James Sinclair
Estate of Mrs. Doris Sinclair
Mrs. M. A. Murphy
Mrs. S.M. Simkins
Mrs. A. Williams

629,280
122,500
625,823
171,554
121,825

15.97
3.15
16.05
4.40
3.12

THE REORGANISATION OF THE SINCLAIR FAMILY’S INTERESTS

On 8 April 2005, the 100,000 Mountview shares then held by Sinclair Estates Limited were
distributed as follows:

As a dividend in specie to Mrs. M.A. Murphy: 32,500 shares.
As a dividend in specie to the former Kingsway Wallpaper Stores Limited: 13,335 shares.

On 8 April 2005, the 79,350 Mountview shares then held by the former Kingsway Wallpaper
Stores Limited plus the 13,335 shares received from Sinclair Estates Limited were distributed
as follows:

As a dividend in specie to Mrs. P.J. Sinclair: 34,757 shares.
Retained by the former Kingsway Wallpaper Stores Limited (since renamed ALFL
Limited): 57,928 shares.

DIRECTORS’ INTERESTS IN CONTRACTS

There was no Contract in existence during or at the end of the financial year in which a Director
of the Company is, or was, materially interested, and which is or was significant in relation to
the Company’s business.

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REPORT OF THE DIRECTORS

DIRECTORS’ AND OFFICERS’ LIABILITY INSURANCE

The Company purchases liability insurance covering the Directors and Officers of the
Company and its Subsidiary undertakings.

10.

POLICY ON THE PAYMENT OF CREDITORS

The Company’s policy in respect of all its suppliers is to settle the terms of payment when
agreeing the terms of each transaction. The Company also ensures that the suppliers are made
aware of the terms of payment and abides by them.

Trade creditors existing at 31 March 2006 relating to purchases of property stock generally
complete 28 days after exchange of contracts. Other trade creditors were settled, on average, 14
days after incurring the liability (2005: 14 days).

11.

REMUNERATION POLICY

The Company’s Shareholders will be asked to approve the Remuneration Report contained in
the Annual Report and Accounts at the Annual General Meeting to be held on 16 August 2006
and a resolution is drafted accordingly.

12.

CORPORATE GOVERNANCE

The Directors’ statement on corporate governance is set out on pages 11 to 13.

13. HEALTH AND SAFETY

The Group is committed to achieving a high standard of health and safety. The Group operates
and regularly reviews its health and safety policies and practices to ensure that appropriate
standards are maintained.

14. DONATIONS

During the year the Group made charitable donations of £29,515 (2005: £34,853).

There were no political donations (2005: £nil).

15. GOING CONCERN

The Directors continue to adopt the going concern basis in preparing the accounts.

They are of the opinion that the Group and the Company have adequate resources to continue
in operational existence for the foreseeable future.

16.

AUDITORS

Grant Thornton UK LLP were appointed on 28 November 2005 to fill a casual vacancy in
accordance with section 388(1) of the Companies Act 1985. A resolution to re-appoint Grant
Thornton UK LLP as auditors for the ensuing year will be proposed at the Annual General
Meeting in accordance with section 385 of the Companies Act 1985.

By Order of the Board
M. M. BRAY
Secretary

Mountview House
151 High Street
Southgate
London N14 6EW
18 July 2006

STATEMENT OF DIRECTORS’ RESPONSIBILITIES

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The Directors are responsible for preparing the Annual Report and the Group financial statements in
accordance with the applicable law and International Financial Reporting Standards as adopted by
European Union, in addition the Directors are responsible for preparing the Parent Company
accounts in accordance with UK GAAP.

Company law requires the Directors to prepare financial statements for each financial year which
give a true and fair view of the state of affairs of the Company and the Group and of the profit or
loss for that period. In preparing these financial statements, the Directors are required to:

select suitable accounting policies and then apply them consistently;

(cid:1)
(cid:1) make judgements and estimates that are reasonable and prudent;
(cid:1)

(cid:1)

state whether Accounting Standards have been followed, subject to any material departures
disclosed and explained in the financial statements;
prepare the financial statements on the going concern basis unless it is inappropriate to presume
that the Group will continue in business.

The Directors are responsible for keeping proper accounting records which disclose with reasonable
accuracy at any time the financial position of the Company and the Group and to enable them to
ensure that the financial statements comply with the Companies Act 1985. They are also responsible
for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for
the prevention and detection of fraud and other irregularities.

In so far as the Directors are aware:

(cid:1)

there is no relevant audit information of which the Company’s auditors are unaware; and
The Directors have taken all steps that they ought to have taken to make themselves aware of
any relevant audit information and to establish that the auditors are aware of that information.

By Order of the Board
M. M. BRAY
Secretary

Mountview House
151 High Street
Southgate
London N14 6EW
18 July 2006

CORPORATE GOVERNANCE

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The Financial Reporting Council (FRC) published a new version of the Combined Code in July 2003
following publication of the Higgs report earlier that year. This is applicable to the Company for the
reporting year commencing 1 April 2004. The Board is satisfied that as a “small company” outside the
FTSE 350 it would currently meet most of the requirements.

Mountview Estates P.L.C. is a family controlled Company. There is a concert party in existence, of
which members of the Sinclair family, Sinclair Estates Limited, Viewthorpe Limited, Directors of the
Company and various long standing supporters of the Company are currently members. As a result
of a reorganisation of certain of the Sinclair family’s interests which took place in April 2005, shares
in the Company which had previously been held by certain former members of the concert party are
no longer being treated as held by the concert party. Due to this reorganisation and the addition also
of certain other shareholdings, the net aggregate shareholdings of the concert party now amounts to
approximately 53 percent of the issued share capital of the Company.

Throughout the year ended 31 March 2006 the Company has been in compliance with the Code
provisions set out in Section 1 of the July 2003 FRC Combined Code on Corporate Governance with
certain exceptions noted below:

(cid:1)

A2.1 requires justification for combining the posts of Chairman and Chief Executive Officer.
There is no formal division of responsibilities but neither the Chairman nor any other member
of the Board has unfettered powers of decision.

As it is a small Company, there is no formal nomination of a senior independent director.

A3.2 The majority of non-executive Directors should be independent of management and free
from any business or other relationship which could materially interfere with the exercise of
their independent judgement. Mr. J.P. Hall, a non-executive Director, is the Chief Executive of
Brewin Dolphin Holdings PLC but has no influence or part in the corporate advice received by
the Company. Mr.J.P. Hall’s detachment from the day to day issues raised within the Company
during the year, together with the presence of the second non-executive Director Mr. N.S. Palmer
provide sufficiently strong and experienced balance with the executive members of the Board
for a Company of this size.

In view of this we continue to believe that both our non-executive Directors are independent.

The Board

For the year ended 31 March 2006 the Board comprised the Chairman, Mr. D. M. Sinclair, four
executive Directors and two non-executive Directors. All Directors have access to independent
professional advice at the expense of the Company and to the services of the Company Secretary who
is responsible to the Board for ensuring the correct procedures are followed.

In addition to ad-hoc meetings arranged to discuss particular transactions and events, the full Board
meets at least four times a year and retains full and effective control over the Group’s activities.

Meetings

Mr. D.M. Mr. C.
Sinclair Maunder Langrish- Murphy

Mr. K. Miss J.L. Mrs. M.M. Mr. J.P. Mr. N.S.
Palmer
Bray

Hall

Full Board

Audit Committee

Remuneration
Committee

n/a

Taylor

Smith

n/a

Day to day management is delegated to the Executive Board which focus on major transactions,
business growth, strategy, cash management and control.

There is regular communication with the Non-Executive Directors in order to keep them informed on
the Company’s operations.

CORPORATE GOVERNANCE

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All members of the Board are subject to the re-election provisions of the Articles which require them
to offer themselves for re-election at least once every three years and, on appointment, at the first
Annual General Meeting (AGM) after appointment. Details of those directors offering themselves for
re-appointment are set out in the Directors’ Report on Page 7.

Directors – performance evaluation

The Board is of the opinion that the Directors performance is continuously evaluated throughout
the year.

Any areas of concern are addressed during our regular management or Board meetings. Each of the
Directors is responsible for his/her self-appraisal process in respect of their individual performance
during the year. This is in turn discussed with the members of the Remuneration Committee who also
review the performance of the Board as a whole.

Remuneration Committee

The Remuneration Committee comprises Mr. J. Hall (non-executive Director) and Mr. N. Palmer
(non-executive Director). The Committee, which is chaired by Mr. J. Hall, monitors, reviews and
makes recommendations to the Board on all elements of the remuneration of the executive Directors.
The Committee meets twice a year.

No Director is involved in deciding his/her own remuneration and the remuneration of the non-
executive Directors is determined by the full Board.

The report of Directors’ Remuneration is set out on Pages 14 to 15.

Nomination Committee

The Nomination Committee is responsible for the selection and approval of appointments to the
Board. Given the small size of the Company the Chairman of the Nomination Committee is Mr. D.M.
Sinclair and all the Directors of the Company are members.

There were no meetings of this Committee during the year.

Audit Committee

The Audit Committee comprises Mr. J. Hall (non-executive Director) and Mr. N. Palmer (non-
executive Director). The Committee, which is chaired by Mr. N. Palmer, has clear terms of reference
agreed by the Board and is responsible for ensuring that the Group’s system of financial control is
adequate. It also keeps under review the cost effectiveness of the audit and the independence and
objectivity of the auditors. The Committee has made recommendation and presided over the selection
of new auditors. The process involved inviting four prospective firms to submit their prospectus. Mr
D.M.Sinclair and Mrs M.M.Bray also participated alongside the Audit Committee members during
two of the presentations from which Grant Thornton UK LLP were selected as new auditors for the
current financial year.

The Committee meets a minimum of three times a year and at least one of these meetings is with the
external auditors without an executive director in attendance. The Chairman of the Audit Committee
reports to the Board on matters discussed with external auditors. The Audit Committee monitors the
integrity of the financial statements and reviews the interim and annual financial statements before
submission to the Board. Further the Committee seeks to ensure that the external auditors are
independent.

Whilst both members of the Audit Committee have vast financial experience, neither of them holds
accounting qualifications. The Audit Committee has satisfied itself that the Company complies with
the principles set out in the Smith Report.

CORPORATE GOVERNANCE

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Communications with Shareholders

The Company communicates with its shareholders by way of the annual reports and accounts and
half yearly interim reports. Investors may use the Company’s Annual General Meeting to
communicate with the Board. The Board including the non-executive Directors is available
throughout the year to listen to the views of Shareholders.

Internal Financial Control

An ongoing process for identifying, evaluating and managing the significant risks faced by the Group
was in place throughout the period from 1 April 2005 to the date of approval of the Annual Report
and Accounts. This process is regularly reviewed by the Board and accords with the Internal Control
Guidance for Directors in the Combined Code.

The Directors are responsible for establishing and maintaining the Group’s system of internal
financial control. Internal control systems in any group are designed to meet the particular needs of
that group and the risks to which it is exposed, and by their nature can provide reasonable but not
absolute protection against material misstatement or loss. Due to its size, the Group does not have an
internal audit function. The key procedures which the Directors have established with a view to
providing effective internal financial control are as follows:

Identification of Business Risks – The Board is responsible for identifying the major business risks
faced by the Group such as fluctuations in interest rates, inflation rates, fluctuations in consumer
spending, employment levels and for determining the appropriate course of action to manage those
risks.

Management Structure – The Board has overall responsibility for the Group and there is a formal
schedule of matters specifically reserved for decision by the Board.

Corporate Accounting – Responsibility levels are communicated throughout the Group as part of the
corporate accounting procedures. These procedures set out authorisation levels, segregation of duties
and other control procedures.

Quality and Integrity of Personnel – The integrity and competence of personnel is ensured through
high recruitment standards and close Board supervision.

Monitoring – Internal financial control procedures are reviewed by the Board as a whole. These
reviews embrace the provision of regular information to management, and monitoring of
performance and key performance indicators.

REMUNERATION REPORT

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UNAUDITED INFORMATION

Remuneration Committee
The Remuneration Committee, as constituted by the Board is responsible for the determination of the
remuneration of the executive Directors of Mountview Estates P.L.C. The Board as a whole considers
the remuneration of the non-executive Directors. External advisors were not used in the year under
review. The composition of the Committee has not altered during the year.

Remuneration Policy
The Group operates in a competitive environment. In forming its policy on remuneration the Group
aims to set reward packages which enable the Group to attract, retain and motivate executives with
the appropriate skills and experience.

The Remuneration Committee has developed the following specific remuneration package consisting
of two elements.

(cid:1)

Basic salary and benefits – the fixed part of the package
Annual discretionary bonuses

Basic salaries and benefits in kind for each executive Director are reviewed on an annual basis by the
Remuneration Committee, which takes into account individual responsibilities, experience and
performance as well as competitive market practice. Benefits include provision of a car and private
medical health insurance. Directors have the choice of the use of the company car or the cash
alternative. The Group does not operate any share option scheme.

Bonuses are recommended by the Committee and approved by the Board having regard to the
performance of the Group and the executive Directors during the year. In assessing corporate
performance the Remuneration Committee takes into account the Group’s corporate performance
within the property sector.

Non-Executive Directors
Each non-executive Director receives fees of £24,000 per annum. The non-executive Directors are not
entitled to bonuses, benefits or pension contributions.

Pensions
The Company contributes 3% of the total of the executive Directors’ gross annual salaries and bonuses
to a Stakeholder Pension Scheme. The above scheme is available to all employees of the Company.

Performance Graph
The graph below is prepared in accordance with The Directors’ Remuneration Report Regulations
2002 and illustrates the Company’s performance compared to a broad equity market index over the
past five years. As the Company is a constituent of the FTSE All-Share Real Estate Index, that index
is considered the most appropriate form of broad equity market index against which the Company’s
performance should be plotted. Performance is measured by Total Shareholder Return as represented
by share price performance and dividend.

Total Shareholder Return

220

200

180

160

140

120

100

FTSE All-Share Real Estate Index

Mountview Estates P.L.C.

2001

2002

2003

2004

2005

2006

31 March

Source: Datastream

The graph looks at the value of £100 invested in Mountview Estates PLC on 31 March each year
compared to the value of £100 invested in the FTSE All-Share Real Estate Index.

REMUNERATION REPORT

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AUDITED INFORMATION

2006
Executive
D. M. Sinclair
K. Langrish-Smith
C. Maunder Taylor
Miss J. L. Murphy
Mrs M. M. Bray

Non-Executive
J.P. Hall
N.S. Palmer

2005
Executive
D. M. Sinclair
K. Langrish-Smith
C. Maunder Taylor
Miss J. L. Murphy
Mrs M. M. Bray

Non-Executive
J.P. Hall
N.S. Palmer

Salary
£000

Bonus
£000

Benefits
in kind
£000

Pensions
Contri-
butions
£000

200
120
150
150
150

24
24

818

120
45
70
60
105

–
–

400

26
14
11
12
–

–
–

10
5
7
6
8

–
–

Salary
£000

Bonus
£000

Benefits
in kind
£000

Pensions
Contri-
butions
£000

200
120
150
150
135

18
18

791

150
60
95
80
95

–
–

480

26
14
11
10
–

–
–

12
6
8
8
8

–
–

Total
£000

356
184
238
228
263

24
24

1,317

Total
£000

388
200
264
248
238

18
18

1,374

Service Contracts
Each of the executive Directors who served during the year has a service agreement, which can be
terminated on one year’s notice by either party.

Approval
An Ordinary Resolution to approve this report will be proposed at the Annual General Meeting of the
Company.

This report was approved by the Board on 18 July 2006.

John Hall
Chairman of the Remuneration Committee

CONSOLIDATED INCOME STATEMENT

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for the year ended 31 March 2006

REVENUE

Cost of sales

GROSS PROFIT

Administrative Expenses
Increase in fair value of investments
Gain on sale of investment properties

PROFIT FROM OPERATIONS

Finance costs
Income from investments

PROFIT BEFORE TAXATION

Income tax expense

PROFIT ATTRIBUTABLE TO
EQUITY SHAREHOLDERS

Notes

7
8

28,054

(3,058)
337
599

25,932

(3,299)
27

22,660

(6,738)

15,922

Basic and diluted earnings per share (pence)

408.4

Year
ended
2006
£000

47,456

Year
ended
2005
£000

48,778

(19,402)

(17,758)

31,020

(3,019)
331
325

28,657

(3,830)
21

24,848

(7,482)

17,366

445.4

GROUP BALANCE SHEET

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as at 31 March 2006

As at
31 March
2006
£000

Notes

As at
31 March
2005
£000

12
14

16
17

22
23
23
23
24

19
20

2,735
20,780

23,515

176,095
651
2,338

179,084

202,599

195
55
25
56
142,849

143,180

29,716
5,056

34,772

20,149
3,078
1,420

24,647

59,419

2,821
22,468

25,289

174,775
319
2,288

177,382

202,671

195
55
25
56
131,840

132,171

29,534
5,584

35,118

31,124
3,155
1,103

35,382

70,500

ASSETS

NON CURRENT ASSETS

Property, plant and equipment
Investment properties

CURRENT ASSETS

Inventories of trading properties
Trade and other receivables
Cash and cash equivalents

TOTAL ASSETS

EQUITY AND LIABILITIES

Equity attributable to equity holders
of the parent
Share capital
Capital redemption reserve
Capital reserve
Other reserves
Retained earnings

NON-CURRENT LIABILITIES

Long-term borrowings
Deferred tax

CURRENT LIABILITIES

Bank overdrafts and loans
Current tax payable
Trade and other payables

TOTAL LIABILITIES

TOTAL EQUITY AND LIABILITIES

202,599

202,671

Approved by the Board on 18 July 2006.

D. M. SINCLAIR Chairman

K. LANGRISH-SMITH Director

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

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for the year ended 31 March 2006

Share Revaluation
reserve
capital
£000
£000

Capital
Capital redemption
reserves
reserves
£000
£000

Other
reserves
£000

Retained
earnings
£000

Total
£000

Changes in equity for
year ended 31 March 2005

Balance as at 1 April 2004

195

–

119,228

119,559

Profit for the year

Dividends

17,366

(4,754)

Balance at 31 March 2005

195

–

131,840

132,171

Changes in equity for
year ended 31 March 2006

Profit for the year

Dividends

15,922

(4,913)

Balance at 31 March 2006

195

–

142,849

143,180

CONSOLIDATED CASH FLOW STATEMENT

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for the year ended 31 March 2006

Year
ended
2006
£000

Notes

Year
ended
2005
£000

CASH FLOWS FROM OPERATING
ACTIVITIES

Profit from operations

25,932

28,657

Adjustments for:
Depreciation
Loss on disposal of property, plant and equipment
Increase in fair value of investment properties
Gain on sale of investment properties

Operating cash flows before movement
in working capital
(Increase) in inventories
(Increase) in receivables
Increase in payables

Cash generated from operations
Interest paid
Income taxes paid

Net cash from operating activities

Investing activities

Interest received
Purchase of property, plant and equipment
Purchase of investment properties
Proceeds from sale of investment properties
Proceeds from disposal of property,
plant and equipment

Net cash from/(used) in investing activities

Cash flows from financing activities

Increase in borrowings
Repayment of borrowings
Dividends paid

Net cash used from financing activities

12
14

Net decrease in cash and cash equivalents

Cash and cash equivalents at beginning of the period

Cash and cash equivalents at end of year

159
30
(337)
(599)

25,185
(1,320)
(331)
317

23,851
(3,299)
(7,343)

13,209

27
(165)
(498)
3,122

2,547

–
(12,711)
(4,913)

(17,624)

(1,868)

(13,718)

(15,586)

121
3
(331)
(325)

28,125
(4,659)
(141)
(122)

23,203
(4,000)
(8,856)

10,347

21
(387)
(126)
395

(61)

3,365
(9,279)
(4,754)

(10,668)

(382)

(13,336)

(13,718)

NOTES TO THE FINANCIAL STATEMENTS

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for the year ended 31 March 2006

PRESENTATION OF FINANCIAL STATEMENTS

The Group’s financial statements have been prepared in accordance with applicable
International Financial Reporting Standards as adopted by the EU (IFRS) and as issued by the
International Accounting Standards Board.

FIRST TIME ADOPTION OF INTERNATIONAL ACCOUNTING AND FINANCIAL
REPORTING STANDARDS

In the current year, the Group has adopted IFRS for the first time,and the Group financial
statements are prepared under IFRS. The Company Balance Sheet has been prepared under
UK GAAP.

The Group has applied IFRS 1 First time adoption of International Financial Reporting Standards to
provide a starting point for reporting under IFRS. The date of transition to IFRS was selected
as 1 April 2004 and all comparative information in these financial statements has been restated
to reflect the Group’s adoption of IFRS.

Significant differences between UK GAAP and IFRS as at 31 March 2005 are as follows.

IAS 40 – Investment property
Under IAS 40, an investment property is recognised in the accounts at fair value, with
revaluation gains being taken directly to the Group income statement rather than directly to
the revaluation reserve as was previously required under UK GAAP. Accumulated
revaluation surpluses relating to investment properties as at the transition date have been
reallocated to retained earnings. This treatment does not, however, have any impact on the
distributable profits.

IAS 12 – Income taxes
Under IAS 12, deferred tax is recognised on ‘temporary differences’ rather than timing
differences, which has been the basis in the UK under FRS19.

Timing differences, which focus on profit and loss movements, are the difference between the
taxable amount and the pre-tax accounting profit that originate in one reporting period and
reverse in one or more subsequent periods. Temporary differences, which focus on balance
sheet movements, are the differences between the carrying amount of an asset or liability in the
balance sheet and its tax base.

In many cases, the deferred tax provision is the same under IAS 12 as under FRS 19. However,
under FRS 19, deferred tax is not provided on the revaluation when a fixed asset is revalued
without there being any commitment or intention to sell the asset. IAS 12 requires deferred tax
to be provided in these circumstances. Where the revaluation has been reflected directly in
reserves, the deferred tax is also charged directly to reserves, with no impact on earnings.

IAS 10 – Events after the balance sheet date
IAS 10 requires that a liability should not be recognised in respect of a dividend until the
paying company has an obligation to make the payment. This would normally be when it was
declared or approved at the annual general meeting in the case of the final dividend for the
year. As a result the 2005 proposed final dividend of £3.197 million is excluded from the IFRS
balance sheet and written back to retained earnings. IFRS also requires that dividends and
distributions are presented in a different way to current UK GAAP. Under IFRS, dividends are
not considered to be an expense of the paying company so they are not included in the income
statement. Instead, dividends are treated as a reserve item and are, therefore, presented in the
statement of changes in equity alongside other transactions with shareholders.

NOTES TO THE FINANCIAL STATEMENTS

Reconciliation of equity at 1 April 2004

The effect of the changes to the Group’s accounting policies on the equity of the Group at the
date of transition, 1 April 2004 was as follows.

for the year ended 31 March 2006

Dividend Deferred
tax
Note 2
£000

UK recognition
Note 1
£000

GAAP
£000

ASSETS
Investment properties
Property, plant and equipment
Inventories
Trade and other receivables
Cash and cash equivalents

22,071
2,604
170,116
177
454

Reserve
transfers
Note 3
£000

IFRS
£000

22,071
2,604
170,116
177
454

Total assets

195,422

–

195,422

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EQUITY
Issued share capital
Revaluation reserve
Capital redemption reserve
Capital reserve
Other reserves
Retained earnings

Total equity

LIABILITIES
Borrowings payable after
one year
Deferred tax provision
Borrowings payable within
one year
Current tax payable
Trade and other payables

195
6,427
55
25
56
115,183

121,941

38,138
–

26,219
4,689
4,435

3,041

(3,041)

(6,427)

(5,423)

6,427

195
–
55
25
56
119,228

(5,423)

–

119,559

5,423

38,138
5,423

26,219
4,689
1,394

75,863

195,422

Total liabilities

73,481

(3,041)

5,423

Total equity and liabilities

195,422

–

NOTES TO THE FINANCIAL STATEMENTS

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for the year ended 31 March 2006

Reconciliation of equity at 31 March 2005

The effect of the changes to the Group’s accounting policies on the equity of the Group
at the date of the last financial statements presented under previous UK GAAP, 31 March 2005,
was as follows.

Revaluation
of
Dividend Deferred investment
tax properties
Note 3
£000

Note 2
£000

UK recognition
Note 1
£000

GAAP
£000

ASSETS
Investment
properties
Property, plant
and equipment
Inventories
Trade and other
receivables
Cash and cash
equivalents

22,468

2,821
174,775

319

2,288

Reserve
transfers
Note 3
£000

IFRS
£000

22,468

2,821
174,775

319

2,288

Total assets

202,671

–

202,671

EQUITY
Issued share capital
Revaluation reserve
Capital redemption
reserve
Capital reserve
Other reserves
Retained earnings

195
6,758

55
25
56
127,469

Total equity

134,558

3,197

(331)

(6,427)

(5,584)

331

6,427

195
–

55
25
56
131,840

(5,584)

–

132,171

LIABILITIES
Borrowings payable
after one year
Deferred tax
provision
Borrowings payable
within one year
Current tax payable
Trade and other
payables

29,534

31,124
3,155

4,300

(3,197)

5,584

Total liabilities

68,113

(3,197)

5,584

Total equity
and liabilities

202,671

–

29,534

5,584

31,124
3,155

1,103

70,500

202,671

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 March 2006

Notes to the reconciliation of equity

(1) Dividend recognition
Under UK GAAP, dividends are accrued in the period to which they relate, regardless of when
they are declared and approved. Under IAS 10, Events after the Balance Sheet Date, shareholders’
dividends are accrued only when declared and appropriately approved. This has increased
shareholders funds by £3.041 million and £3.197 million pounds at 1 April 2004 and 31 March
2005 respectively.

(2) Deferred tax
Under UK GAAP no deferred tax provision is required on the revaluation of investment
properties if there is no intention of selling the properties.

Under IAS 12, Income tax, deferred tax is recognised on all taxable temporary differences, and
is therefore provided on all revaluation gains of the Group’s investment properties. The
deferred tax provision is £5.423 million at 1 April 2004, and £5.584 million at 31 March 2005.

(3) Revaluation of investment properties
Under UK GAAP revaluation surpluses on investment properties were credited to a separate
account within reserves.

Under IAS 40, Investment properties, a gain arising from a change in the fair value of investment
properties should be included in net profit for the period in which it arises.

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Reconciliation of profit for year ended 31 March 2005

Revenue

Cost of sales

Gross Profit

Administrative expenses
Increase in fair value of
investment properties
Gain on sale of
investment properties
Finance costs

Profit before taxation

Income tax expense

Profit attributable
to equity shareholders

UK
GAAP
£000

48,778

(17,758)

31,020

(3,019)

325
(3,809)

24,517

(7,321)

17,196

Revaluation
of
investment
properties
Note 2
£000

Deferred
tax
Note 1
£000

IFRS
£000

48,778

(17,758)

31,020

(3,019)

331

325
(3,809)

24,848

(7,482)

331

–

(161)

331

17,366

NOTES TO THE FINANCIAL STATEMENTS

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for the year ended 31 March 2006

Notes to the reconciliation of profit

(1) Deferred tax
Under UK GAAP no deferred tax provision is required on the revaluation of investment
properties if there is no intention of selling the properties.

Under IAS 12, Income tax, deferred tax is recognised on all taxable temporary differences, and
is therefore provided on all revaluation gains of the group’s investment properties. The
deferred tax provision for the year ended 31 March 2005 was £161,000.

(2) Revaluation of investment properties
Under UK GAAP revaluation surpluses on investment properties were credited to a separate
account within reserves.

Under IAS 40, Investment properties, a gain arising from a change in the fair value of investment
properties should be included in net profit for the period in which it arises. Therefore, the
revaluation gains on investment properties during the year ended 31 March 2005 of £331,000
has been credited to the income statement.

Explanation of material adjustments to the cash flow statement for 2005
Income taxes of £8.856 million paid during 2005 are classified as operating cash flows under
IFRS, but were included in a separate category of tax cash flows under previous GAAP. There
are no other material differences between the cash flow statement presented under IFRS and
the cash flow statement presented under previous GAAP.

ACCOUNTING POLICIES

(a)

(b)

Basis of Preparation
The Accounts have been prepared under the historical cost convention, as modified by
the revaluation of investment properties, and in accordance with applicable
International Financial Reporting Standards as adopted by the EU.

Basis of Consolidation
The Group’s financial statements incorporate the results of Mountview Estates P.L.C.
and all of its Subsidiary undertakings made up to 31 March each year. Control is
achieved where the company has the power to govern the financial and operating
policies of an investee enterprise so as to obtain benefits from its activities.

The Group exercise control through voting rights.

On acquisition, the identifiable assets, liabilities and contingent liabilities of a subsidiary
are measured at their fair values at the date of acquisition. The purchase method has
been used in consolidating the subsidiary financial statements.

All significant inter company transactions and balances between group enterprises are
eliminated on consolidation within the consolidated accounts. Consistent accounting
policies have been used across the Group.

(c)

Investment Properties
Investment properties, which are properties held to earn rentals and/or for the capital
appreciation, are stated at their fair value at the balance sheet date. Gains or losses
arising from changes in the fair value of investment properties are included in net profit
or loss for the period in which they arise.

NOTES TO THE FINANCIAL STATEMENTS

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for the year ended 31 March 2006

(d)

Income Tax
The charge for current tax is based on the results for the year as adjusted for items, which
are non-assessable or disallowed. It is calculated using rates that have been enacted or
substantively enacted by the balance sheet date.

Deferred tax is accounted for using the balance sheet liability method in respect of
temporary differences arising from differences between the carrying amount of assets and
liabilities in the financial statements and the corresponding tax base used in the computation
of taxable profit. In principle, deferred tax liabilities are recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is probable that taxable
profits will be available against which deductible temporary differences can be utilised. Such
assets and liabilities are not recognised if the temporary difference arises from the initial
recognition (other than in a business combination) of other assets and liabilities in a
transaction, which affects neither the tax profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on
investments in subsidiaries, except where the Group is able to control the reversal of the
temporary difference and it is probable that the temporary difference will not reverse in
the foreseeable future.

Deferred tax is calculated at the rates that are expected to apply when the asset or
liability is settled. Deferred tax is charged or credited in the income statement, except
when it relates to items credited or charged directly to equity, in which case the deferred
tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when they relate to income taxes levied by
the same taxation authority and the Group intends to settle its current tax assets and
liabilities on a net basis.

(e)

Revenue
Revenue includes proceeds of sales of properties, rents from properties, which are held as
trading stock, investment and other sundry items of revenue before charging expenses.

Rental income is recognised over the rental period.

Sales of properties are recognised on legal completion, as in the Directors opinion, this is
the period at which the substantial risks and rewards of ownership have been transferred.

(f)

Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation.

Depreciation is calculated so as to write off the cost of an asset, less its estimated residual
value, over the useful economic life of that asset using the straight line method as follows:

Freehold property

Fixtures and fittings and office equipment

Motor vehicles

Computer equipment

–

20%

25%

(g)

Impairment of Non-Current Assets
Non-current assets are subject to review for impairment on an annual basis. Any
impairment is recognised in the Income Statement in the year in which it occurs.

(h)

Estimates and Judgements

Investment Properties
In considering the values attributable to the investment portfolio, the following factors
are taken into consideration:

• sales of properties within the Group’s portfolio during the preceeding 12 months

• sales of properties in the same district whenever the information is available

• published market research concerning the performance of the property market in this

region and district

• factors affecting individual properties and units in relation to value, and factors in the

district which might affect the values of individual properties and units

NOTES TO THE FINANCIAL STATEMENTS

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E
S
T
A
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S

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for the year ended 31 March 2006

Carrying value of trading stock
The average length of time a unit of stock is held by the Group is 15 years and
historically, the value of properties has increased steadily due to favourable market
condition. In addition it is the Company’s policy to ensure that each unit of stock is kept
in a good state of repair, in order that the value of trading stock will be maintained

Inventories
These comprise residential properties all of which are held for resale, and are valued at
the lower of cost and estimated net realisable value. Cost to the Group includes legal fees
and commission charges incurred during acquisition together with improvement costs.
Net realisable value is the net sale proceeds which the Group expects on sale of a
property with vacant possession. The analysis of the Group trading portfolio as at
31 March 2006 is on page 4.

Pension Costs
The Company operates a defined contribution pension scheme for employees. The
assets of the scheme are held separately from those of the Company. The annual
contributions payable are charged to the Income Statement.

Financial Instruments
Financial assets and financial liabilities are recognised in the Group’s balance sheet when
the Group has become a party to the contractual provisions of the instrument.

Trade receivables and trade payables are measured at their net realisable value.

Bank Borrowings
Loans are recorded at fair value at initial recognition and thereafter at amortised costs
under the effective interest method.

(i)

(j)

(k)

(l)

ANALYSIS OF REVENUE, COST OF SALES AND OTHER OPERATING EXPENSES

The revenue and cost of sales of the Group are analysed as follows:

Revenue
Gross sales of properties
Gross rental income

Cost of Sales
Cost of properties sold
Property expenses

Gross Profit
Sales of properties
Net rental income

2006
£000

35,667
11,789

47,456

14,286
5,116

19,402

21,381
6,673

28,054

2005
£000

37,110
11,668

48,778

13,278
4,480

17,758

23,832
7,188

31,020

NOTES TO THE FINANCIAL STATEMENTS

(a) PROFIT FROM OPERATIONS

The operating profit is stated after charging:
Depreciation of tangible fixed assets
Loss on disposal of fixed assets
Auditors’ remuneration

– as auditors
– for other services

operating expenses for investment properties

And after crediting:

– net rental income
– administrative charges to related

companies (Note 25)

(b) PROFIT ON DISPOSAL OF INVESTMENT

PROPERTIES IN SUBSIDIARIES

STAFF COSTS (including Directors)

Wages and salaries
Social security costs
Pension costs

Directors Remuneration

Total Directors Remuneration including
salary, bonuses, benefits in kind and
pensions contributions amounted to:

for the year ended 31 March 2006

GROUP

2006
£000

159
31

47
–
524

6,673

2005
£000

121
3

45
–
431

7,188

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A
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E
S

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599

325

GROUP

2006
£000
1,935
228
58

2,221

2006
£000

1,317

2005
£000
2,164
287
63

2,514

2005
£000

1,374

The details of Directors’ Remuneration are shown in the audited section of the Remuneration
Report on page 14.

The Company contributes 3% of the total of annual gross salaries and bonuses of each
employee to a Stakeholder Pension Scheme.

The average weekly number of employees during the year was as follows:

Office and management

2006

2005

NOTES TO THE FINANCIAL STATEMENTS

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for the year ended 31 March 2006

FINANCE COSTS

Interest on bank overdrafts, and loans

INCOME FROM INVESTMENTS

Interest on bank deposits

INCOME TAX EXPENSE

(a) Analysis of charge in the year

Current tax:
UK Corporation Tax 30%
(2005: 30%)

Deferred tax:
Current year 30% (2005: 30%)

GROUP

2006
£000

3,299

2006
£000

2005
£000

3,830

2005
£000

7,266

7,321

(528)

161

Taxation attributable to the company and
its subsidiaries

6,738

7,482

(b) Factors affecting income tax expense

The charge for the year can be reconciled to
the profit per the income statement as follows.

Profit on ordinary activities before taxation

22,660

24,848

Profit on ordinary activities multiplied
by rate of tax (30%)
Expenses not deductible for tax
Income not liable to tax
Depreciation in excess of capital allowances
Taxation on capital gains
Marginal relief
Revaluation surplus in subsidiaries not taxed

6,798
44
(189)
(514)
700
–
(101)

Taxation attributable to the company and its subsidiaries

6,738

7,454
1
(28)
163
(2)
(7)
(99)

7,482

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 March 2006

10. DIVIDENDS

On 21 August 2005 a dividend of 82p per share (2004: 78p per share) was paid to
the shareholders. On 27 March 2006 a dividend of 44p per share (2005: 44p per share) was paid
to the shareholders. This resulted in total dividends paid in the year of £4.913 million
(2005: £4.754 million).

In respect of the current year, the Directors propose that a final dividend of 86p per share will
be paid to the shareholders on 21 August 2006. This dividend is subject to approval by the
shareholders at the Annual General Meeting and has not been included as a liability in these
financial statements.

The proposed final dividend for 2006 is payable to all shareholders on the Register of Members
on 21 July 2006. The total estimated final dividend to be paid is £3.353 million.

11.

EARNINGS PER SHARE

GROUP

2006
£000

2005
£000

The calculations of earnings per share are based on the
following profits and number of shares.

Net profit for financial year (basic and fully diluted)

15,922

17,366

Weighted average number of ordinary shares
for basic and fully diluted earnings per share

3,899,014

Basic and Diluted Earnings per share

408.4p

445.4p

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12.

PROPERTY, PLANT AND EQUIPMENT as at 31 March 2006

GROUP

COST
At 1 April 2005
Additions
Disposals

At 31 March 2006

DEPRECIATION
At 1 April 2005
Charge for the year
On disposals

At 31 March 2006

NET BOOK VALUE
At 31 March 2005

At 31 March 2006

Freehold
Fixtures
Property & Fittings
£000

£000

Motor Computer
Vehicles Equipment
£ 000

£000

2,671
–
–

2,671

224
53
–

277

2,447

2,394

224
15
(24)

215

72
41
(11)

102

152

113

310
148
(143)

315

113
54
(73)

197

221

99
2
(60)

74
11
(51)

Total
£000

3,304
165
(227)

3,242

483
159
(135)

507

2,821

2,735

Property, Plant and Equipment are located within United Kingdom.

NOTES TO THE FINANCIAL STATEMENTS

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for the year ended 31 March 2006

13.

PROPERTY, PLANT AND EQUIPMENT as at 31 March 2005

GROUP

COST
At 1 April 2004
Additions
Disposals

At 31 March 2005

DEPRECIATION
At 1 April 2004
Charge for the year
On disposals

At 31 March 2005

NET BOOK VALUE
At 31 March 2004

At 31 March 2005

Freehold
Fixtures
Property & Fittings
£000

£000

Motor Computer
Vehicles Equipment
£000

£000

2,426
245
–

2,671

170
54
–

224

2,256

2,447

205
19
–

224

60
12
–

145

152

292
120
(102)

310

118
49
(54)

113

174

197

97
2
–

68
6
–

Total
£000

3,020
386
(102)

3,304

416
121
(54)

483

2,604

2,821

Property, Plant and Equipment are located within the United Kingdom.

14.

INVESTMENT PROPERTIES

Fair Value at 1 April
Additions
Disposals
Increase in fair value during the year

At 31 March

2006
£000

22,468
498
(2,523)
337

20,780

2005
£000

22,071
126
(60)
331

22,468

The Group’s investment properties were valued at £20,780,000 on an open market value basis
on 31 March 2006 by Mr. C. Maunder Taylor FRICS, a director. This valuation was carried out
in accordance with the “Appraisal and Valuation Standards” published by the Royal
Institution of Chartered Surveyors.

As at 31 March 2006, if the investment properties had not been revalued, the historical cost of
those properties would have been £866,798 (2005: £633,154).

NOTES TO THE FINANCIAL STATEMENTS

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for the year ended 31 March 2006

15.

INVESTMENTS

Fixed Asset Investments
These represent the cost of shares in the following wholly owned Subsidiary undertakings,
which are incorporated and operate in England and Wales. Their results are consolidated in the
accounts of the Group, for the period during which they are Subsidiary undertakings.

Principal Activity

Hurstway Investment Co. Limited

Property Dealing

Louise Goodwin Limited

Property Investment

A.L.G. Properties Limited

Property Investment

16.

INVENTORIES

Residential properties

17.

TRADE AND OTHER RECEIVABLES

Trade receivables
Prepayments and accrued income

GROUP

2006
£000

176,095

2006
£000

526
125

651

Cost
2005
2006
£000

15,351

2,924

18,276

2005
£000

174,775

2005
£000

236
83

319

The Directors consider that the carrying amount of trade and other receivables approximates
their fair value.

18.

TRADE AND OTHER PAYABLES

GROUP

Trade creditors
Other taxes and social security costs
Other creditors
Accruals

2006
£000

372
269
308
471

1,420

2005
£000

166
376
325
236

1,103

The Directors consider that the carrying amount of trade and other payables approximates
their fair value.

NOTES TO THE FINANCIAL STATEMENTS

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for the year ended 31 March 2006

19.

BANK OVERDRAFTS AND LOANS

Bank overdrafts
Bank loans
Other loans

GROUP

2006
£000

17,924
28,216
3,725

49,865

Maturity profile of financial liabilities at 31 March 2006 was as follows:

GROUP

Amounts repayable:
In one year or less
In more than one year but no more than two years
In more than two years but no more than three years
In more than three years but no more than four years
In more than four years but not more than five years
In more than five years

Less: amount due for settlement within 12 months
(shown under current liabilities)

Amount due for settlement after 12 months

The average interest rates paid were as follows.

Bank overdrafts
Bank loans
Other loans

2006
£000

20,149
–
–
–
29,716
–

49,865

20,149

29,716

2006

6.59%
5.74%
5.34%

2005
£000

28,434
25,609
6,615

60,658

2005
£000

31,124
9,428
–
–
16,181
3,925

60,658

31,124

29,534

2005

6.59%
5.89%
5.34%

The Directors consider that the carrying amount of bank overdrafts and loans approximates
their fair value.

The other principal features of the Group’s borrowings are as follows.

The bank overdrafts are repayable on demand. The bank overdrafts are secured by a
Letter of Negative Pledge by Mountview Estates P.L.C.

As at 1 April 2005 the Group had four loans of £4 million, £5 million, £11.537 million, and
£17.5 million. These loans have been renegotiated during the year and consolidated into
one loan, which is not repayable in instalments.

(a)

The loan outstanding at 31 March 2006 is £28.216 million. This is a five year
revolving facility, which the parent company can draw down up to £50 million.
The termination date of the facility is 11 December 2010. The rate of interest
payable on the loan is 1.15% above Libor. The loan is secured by a cross guarantee
between Mountview Estates P.L.C. and its Subsidiaries.

Other loans consist of loans from connected persons, and companies of which Mr. D.M.
Sinclair is a Director. Loans of £2.225 million (2005: £2.69 million) are repayable within
one year, and loan of £1.5 million (2005: £3.925 million) are repayable in the third to fifth
year inclusive. Interest payable on these loans is at 0.75% above Barclays Bank Plc base
rate. From 1 April 2006 the interest payable on these loans will reduce to 0.5% above
Barclays Bank Plc base rate.

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 March 2006

20. DEFERRED TAX

Analysis for financial reporting purposes

Deferred tax liabilities
Deferred tax assets

Net position at 31 March

GROUP

2006
£000

5,056
–

5,056

The movement for the year in the Group’s net deferred tax position was as follows.

At 1 April
(Credit)/charge to income for the year

At 31 March

GROUP

2006
£000

5,584
(528)

5,056

2005
£000

5,584
–

5,584

2005
£000

5,423
161

5,584

The following are in deferred tax liabilities recognised by the Group and movements thereon
during the period.

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Revaluation
of properties
£000

5,584
(528)

5,056

Total
£000

5,584
(528)

5,056

At 1 April 2005
Credit to income for the year

At 31 March 2006

21.

FINANCIAL INSTRUMENTS

Fair value of financial assets

The Group’s financial assets at the year end consist of trade receivables and cash at bank and
in hand of £2,338,396 (2005: £2,287,829).

The Directors consider that the carrying amount of cash at bank and in hand approximates
their fair value.

The trade receivables amounted to £ 651,000 (2005: 319,000).

The Directors consider that the carrying amount of trade receivables approximates their fair value.

Fair value of borrowings

Bank overdrafts
Secured bank loans
Unsecured loans

2006
£000

17,924
28,216
3,725

49,865

GROUP

2005
£000

28,434
25,609
6,615

60,658

The Directors consider that the carrying amount of borrowings approximates their fair value.
The details of the terms of the borrowings together with the average interest rates can be seen
in Note 19.

NOTES TO THE FINANCIAL STATEMENTS

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for the year ended 31 March 2006

Exposure to credit and interest rate risks arise in the normal course of the Group’s business.
The Directors are of the opinion that credit risk is minimal due to the low level of trade
receivables relative to the Balance sheet totals.

The receivables are reviewed on a regular basis to ensure they are recoverable. The Group has
not adopted any form of interest costs hedging against any potential future changes in interest
rate.The Board is confident that based on the historical performance of the Group, the finance
costs are sufficiently covered by the profits from operations.

Lenders currently do not consider hedging against interest rate fluctuations to be mandatory.

22.

CALLED UP SHARE CAPITAL

Authorised:
5,000,000 ordinary shares of 5p each

Allotted, issued and fully paid:
3,899,014 ordinary shares of 5p each

23. OTHER RESERVES

Capital redemption reserve
Capital reserve
Other reserves

GROUP

2006
£000

250

195

2006
£000

55
25
56

136

2005
£000

250

195

2005
£000

55
25
56

136

The Group does not maintain insurance cover against other risks except where several
properties are located in close physical vicinity. A reserve is maintained to deal with such non-
insured risks and at 31 March 2006 stood at £56,000 (2005: £56,000).

24.

RETAINED EARNINGS

Balance at 1 April 2004
– as originally stated
– prior period adjustment arising from first time

adoption of International Financial Reporting Standards (see Note 2)

as restated

Dividends paid
Net profit for the year

Balance at 1 April 2005

Dividends paid
Net profit for the year

Balance at 31 March 2006

GROUP
£000

115,183

4,045

119,228

(4,754)
17,366

131,840

(4,913)
15,922

142,849

Of retained earnings £6.7 million represents revaluation of investment properties and is not
distributable.

NOTES TO THE FINANCIAL STATEMENTS

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25.

RELATED PARTY TRANSACTIONS

for the year ended 31 March 2006

(a) Mountview Estates P.L.C. provides general management and administration services to
Ossian Investors Limited and Sinclair Estates Limited, companies of which Mr. D.M.
Sinclair is a Director. Fees of £48,738 (2005: £43,878) were charged for these services.

The same services were also provided to Viewthorpe Limited, a company of which
Mr. D. M. Sinclair was a Director during the year. Fees of £17,222 (2005: £16,568) were
charged for these services.

(b)

(c)

(d)

(e)

(f)

(g)

(h)

(i)

(j)

(k)

Included within long-term borrowings is a loan from Sinclair Estates Limited. The
balance outstanding at the balance sheet date was £1,500,000 (2005: £2,700,000). Interest
was payable on the loan at a rate of 0.75 percent above Barclays Bank Plc base rate.
Interest paid in the year on this loan amounted to £37,722 (2005: £84,332).

Included within long-term borrowings is a loan from Ossian Investors Limited. The
balance outstanding at the balance sheet date was £nil (2005: £1,050,000). Interest was
payable on the loan at a rate of 0.75 percent above Barclays Bank Plc base rate. Interest
paid in the year on this loan amounted to £4,835 (2005: £51,023).

Included within other loans repayable in less than one year and on demand is a loan
from Viewthorpe Limited. The balance outstanding at the balance sheet date was
£600,000 (2005: £175,000). Interest was payable on the loan at a rate of 0.75 percent above
Barclays Bank Plc base rate. Interest paid in the year on this loan amounted to £35,365
(2005: £12,819).

The loan of £1,315,000 at 31 March 2005 from Kingsway Wallpaper Stores Limited was
repaid during the year. Interest was payable on the loan at a rate of 0.75 percent above
Barclays Bank Plc base rate. Interest paid in the year on this loan amounted to £1,387
(2005: £68,253). Mr. D.M. Sinclair was a Director of this company.

Included within other loans, repayable in less than one year and on demand is a loan
from Mrs. P. E. Cullen, a shareholder of the Company and a director of Sinclair Estates
Limited. The balance outstanding at the balance sheet date was £500,000 (2005:
£500,000). Interest was payable on the loan at a rate of 0.75 percent above Barclays Bank
Plc base rate. Interest paid in the year on this loan amounted to £26,682 (2005: £24,719).

Included within other loans, repayable in less than one year and on demand is a loan
from Mrs. D. Sinclair, a shareholder of the Company. The balance outstanding at the
balance sheet date was £175,000 (2005: £175,000). Interest was payable on the loan at a
rate of 0.75 percent above Barclays Bank Plc base rate. Interest paid in the year on this
loan amounted to £9,338 (2005: £5,997).

Included within other loans, repayable in less than one year and on demand is a loan
from Mr. K. Langrish-Smith, a Director of the Company. The balance outstanding at the
balance sheet date was £300,000 (2005: £250,000). Interest was payable on the loan at a
rate of 0.75 percent above Barclays Bank Plc base rate. Interest paid in the year on this
loan amounted to £14,865 (2005: 5,052).

Included within other loans, repayable in less than one year and on demand is a loan
from Mrs. E. Langrish-Smith, the wife of a Director of the Company. The balance
outstanding at the balance sheet date was £600,000 (2005: £450,000). Interest was payable
on the loan at a rate of 0.75 percent above Barclays Bank Plc base rate. Interest paid in
the year on this loan amounted to £28,594 (2005: £7,858).

All of the above loans are unsecured.

Transactions between the Group and its Subsidiaries, which are related parties, have
been eliminated on consolidation and have not been disclosed in this note.

INDEPENDENT AUDITORS REPORT

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to the Members of Mountview Estates P.L.C.

We have audited the Group financial statements of Mountview Estates P.L.C. for the year ended
31 March 2006 which comprise the principal accounting policies, the Group income statement, the
Group balance sheet, the Group cash flow statement, the Group statement of changes in shareholders
equity and notes on pages 20-35.These Group financial statements have been prepared under the
accounting policies set out therein.

We have reported separately on the parent company financial statements of Mountview Estates P.L.C.
for the year ended 31 March 2006 and the information in the Directors’ Remuneration Report that is
described as having been audited.

This report is made solely to the Company’s members, as a body, in accordance with Section 235 of
the Companies Act 1985. Our audit work has been undertaken so that we might state to the
Company’s members those matters we are required to state to them in an auditors’ report and for no
other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS

The Directors’ responsibilities for preparing the Annual Report and the Group financial statements in
accordance with United Kingdom law and International Financial Reporting Standards (IFRS s) as
adopted by the European Union, are set out in the Statement of Directors’ Responsibilities.

Our responsibility is to audit the Group financial statements in accordance with relevant legal and
regulatory requirements and International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the Group financial statements give a true and fair view,
whether the Group financial statements have been properly prepared in accordance with the
Companies Act 1985 and Article 4 of the IAS Regulation and whether the information given in the
Directors’ Report is consistent with the financial statements. We also report to you if, in our opinion,
the Company has not kept proper accounting records, if we have not received all the information and
explanations we require for our audit, or if information specified by law regarding directors’
remuneration and other transactions is not disclosed.

We review whether the Corporate Governance Statements reflects the Company’s compliance with
the nine provisions of the 2003 FRC Combined Code specified for our review by the Listing Rules of
the Financial Services Authority, and we report if it does not. We are not required to consider whether
the Boards’ statement on internal control cover all risks and controls, or form an opinion on the
effectiveness of the Group’s corporate governance procedures or its risk and control procedures.

We read other information contained in the Annual Report and consider whether it is consistent with
the audited Group financial statements. The other information comprises only the Directors’ Report,
the Chairman’s Statement, the unaudited part of the Remuneration Report, the Operational Review
and the Corporate Governance Statement. We consider the implications for our report if we become
aware of any apparent misstatements or material inconsistencies with the Group financial statements.

Our responsibilities do not extend to any other informations.

BASIS OF OPINION

We conducted our audit in accordance with International Standards on Auditing (UK and Ireland)
issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence
relevant to the amounts and disclosures in the Group financial statements. It also includes an
assessment of the significant estimates and judgements made by the directors in the preparation of
the group financial statements, and of and of whether the accounting policies are appropriate to the
group’s circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we
considered necessary in order to provide us with sufficient evidence to give reasonable assurance that
the Group financial statements are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall adequacy of the
presentation of information in the Group financial statements.

INDEPENDENT AUDITORS REPORT

OPINION

In our opinion:

•

the Group financial statements give a true and fair view, in accordance with IFRS as adopted by
the European Union, of the state of the Group’s affairs as at 31 March 2006 and of its profit for
the year then ended;

the Group financial statements have been properly prepared in accordance with the Companies
Act 1985 and Article 4 of the IAS Regulation; and

the information given in the Directors’ Report is consistent with the financial statements for the
year ended 31 March 2006.

Grant Thornton UK LLP
Registered Auditors
Chartered Accountants
London
18 July 2006

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COMPANY BALANCE SHEET UNDER UK GAAP

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as at 31 March 2006

FIXED ASSETS

Tangible assets
Investments

CURRENT ASSETS

Stocks
Debtors
Cash at bank and in hand

CREDITORS: Amounts falling
due within one year

NET CURRENT ASSETS

TOTAL ASSETS LESS CURRENT
LIABILITIES

CREDITORS: Amounts falling due
after more than one year

CAPITAL AND RESERVES

Called up share capital
Capital redemption reserve
Capital reserve
Other reserves
Profit and loss account

EQUITY SHAREHOLDERS’ FUNDS

Approved by the Board on 18 July 2006.

Notes

3
4

5
6

9
10
10
10
11

MOUNTVIEW

2006
£000

2,672
18,276

20,948

167,709
595
2,203

170,507

(23,890)

146,617

Restated
2005
£000

2,747
18,276

21,023

168,199
259
2,187

170,645

(34,880)

135,765

167,565

156,788

(47,293)

120,272

195
55
25
39
119,958

120,272

(45,260)

111,528

195
55
25
39
111,214

111,528

D. M. SINCLAIR Chairman

K. LANGRISH-SMITH Director

NOTES TO THE FINANCIAL STATEMENTS UNDER UK GAAP

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ACCOUNTING POLICIES

for the year ended 31 March 2006

(a)

(b)

(c)

(d)

(e)

(f)

(g)

Basis of Accounting
The Accounts have been prepared under the historical cost convention, as modified by
the revaluation of investment properties, and in accordance with applicable Accounting
Standards, and taking into account FRS 21 the new standard “Events after the balance
sheet date”. Under this standard, dividends cannot be recognised within the financial
year unless they have been declared.

Investments
Fixed asset investments in Subsidiary undertakings are stated at cost less any provision
for impairment.

Taxation
Corporation tax payable is provided on taxable profits at the current rate.

Turnover
Turnover includes proceeds of sales of properties, rents from properties which are held
as trading stock, or investment and other sundry items of revenue before charging
expenses.

Sales of properties are recognised on legal completion.

Depreciation
Depreciation is calculated so as to write off the cost of an asset, less its estimated residual
value, over the useful economic life of that asset as follows:

Freehold property

Fixtures and fittings and office equipment

Motor vehicles

Computer equipment

–

2% on straight line

20% on straight line

25% on straight line

Impairment of Fixed Assets
Fixed Assets are subject to review for impairment in accordance with FRS 11
“Impairment of Fixed Assets and Goodwill”. Any impairment is recognised in the Profit
and Loss Account in the year in which it occurs.

Stocks
These comprise residential properties all of which are held for resale, and are valued at
the lower of cost and estimated net realisable value. Cost to the Group includes legal fees
and commission charges incurred during acquisition together with improvement costs.
Net realisable value is the net sale proceeds which the Group expects on sale of a
property with vacant possession. The analysis of the Group trading portfolio as at
31 March 2006 is on Page 4.

STAFF COSTS (including Directors)

MOUNTVIEW

Wages and salaries
Social security costs
Pension costs

2006
£000

1,935
228
58

2,221

2005
£000

2,164
287
63

2,514

NOTES TO THE FINANCIAL STATEMENTS UNDER UK GAAP

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for the year ended 31 March 2006

The Company contributes 3% of the total of annual gross salaries and bonuses of each
employee to a Stakeholder Pension Scheme.

The average weekly number of employees during the year was as follows:-

Office and management

DIRECTORS REMUNERATION

Total Directors Remuneration including
salary, bonuses, benefits in kind and
pensions contributions amounted to:

TANGIBLE ASSETS as at 31 March 2006

2006
£000

2005
£000

1,317

1,374

MOUNTVIEW
ESTATES P.L.C.

COST
At 1 April 2005
Additions
Disposals

At 31 March 2006

DEPRECIATION
At 1 April 2005
Charge for the year
On disposals

At 31 March 2006

NET BOOK VALUE
At 31 March 2006

At 31 March 2005

Fixtures
Freehold
Property & Fittings
£000

£000

Motor Computer
Vehicles Equipment
£ 000

£000

2,671
–
–

2,671

224
53
–

277

2,394

2,447

103
3
(24)

26
16
(10)

310
148
(143)

315

113
54
(73)

221

197

99
2
(60)

74
11
(51)

Total
£000

3,183
153
(227)

3,109

437
134
(134)

437

2,672

2,747

All tangible assets of the Company are located within the United Kingdom.

INVESTMENTS

Principal Activity

Hurstway Investment Co. Limited

Property Dealing

Louise Goodwin Limited

Property Investment

A.L.G. Properties Limited

Property Investment

Cost
2005
2006
£000

15,351

2,924

18,276

NOTES TO THE FINANCIAL STATEMENTS UNDER UK GAAP

STOCKS

Residential properties

DEBTORS: due within one year

Trade debtors
Prepayments and accrued income

CREDITORS: Amounts falling due within one year

Bank loans and overdrafts
Trade creditors
Corporation tax
Other taxes and social security costs
Other creditors
Other loans

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for the year ended 31 March 2006

MOUNTVIEW

2006
£000

2005
£000

167,709

168,199

MOUNTVIEW

2006
£000

475
120

595

2005
£000

176
83

259

MOUNTVIEW

2006
£000

17,924
345
2,398
269
729
2,225

Restated
2005
£000

28,434
156
2,735
376
489
2,690

23,890

34,880

Other loans consist of loans from connected persons. Interest payable on these loans was at
0.75% above Barclays Bank Plc base rate.

CREDITORS: Amounts falling due after more than one year

Bank loans and overdrafts
Amounts owed to subsidiary undertakings
Other loans

MOUNTVIEW

2006
£000

28,216
17,577
1,500

2005
£000

25,609
15,726
3,925

47,293

45,260

Other loans consist of loans from companies of which Mr. D.M. Sinclair is a Director. Interest
payable on these loans was at 0.75% above Barclays Bank Plc base rate.

NOTES TO THE FINANCIAL STATEMENTS UNDER UK GAAP

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for the year ended 31 March 2006

Maturity profile of financial liabilities at 31 March 2006 was as follows:

Amounts repayable:
Within one year or on demand
In more than one year but not more than two years
In more than two years but not more than five years
In more than five years

MOUNTVIEW

2006
£000

20,149
–
29,716
17,577

2005
£000

31,124
9,428
16,181
19,651

67,442

76,384

The bank overdrafts are repayable on demand. A letter of Negative Pledge by
Mountview Estates P.L.C. secures the bank overdrafts.

(a)

Other loans consist of loans from connected persons, and companies of which Mr. D.M. Sinclair
is a Director. Loans of £2.225 million (2005: £2.69 million) are repayable within one year, and
loan of £1.5 million (2005: £3.925 million) are repayable in the third to fifth year inclusive.
Interest payable on these loans was at 0.75% above Barclays Bank Plc base rate.

From 1 April 2006 the interest payable on these loans will reduce to 0.5% above Barclays Bank
Plc base rate.

CALLED UP SHARE CAPITAL

Authorised:
5,000,000 ordinary shares of 5p each

Allotted, issued and fully paid:
3,899,014 ordinary shares of 5p each

10. OTHER RESERVES

Capital redemption reserve
Capital reserve
Other reserves

MOUNTVIEW

2006
£000

250

2005
£000

250

195

MOUNTVIEW

2006
£000

55
25
39

119

2005
£000

55
25
39

119

The Company does not maintain insurance cover against other risks except where several
properties are located in a close physical vicinity. A reserve is maintained to deal with such
non-insured risks and at 31 March 2006 stood at £39,000 (2005: £39,000).

NOTES TO THE FINANCIAL STATEMENTS UNDER UK GAAP

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11.

PROFIT AND LOSS ACCOUNT

As at 1 April 2005
Retained profit for the Financial Year

12.

RELATED PARTY TRANSACTIONS

for the year ended 31 March 2006

MOUNTVIEW

2006
£000

111,214
8,744

Restated
2005
£000

97,645
13,569

119,958

111,214

(b)

(c)

(d)

(e)

(f)

(g)

The same services were also provided to Viewthorpe Limited, a company of which
Mr. D. M. Sinclair was a Director during the year. Fees of £17,222 (2005: £16,568) were
charged for these services.

Included within other loans,repayable in less than one year and on demand is a loan
from Mrs. D. Sinclair, a shareholder of the Company. The balance outstanding at the
balance sheet date was £175,000 (2005: £175,000). Interest was payable on the loan at a
rate of 0.75 percent above Barclays Bank Plc base rate. Interest paid in the year on this
loan amounted to £9,338 (2005: £5,997).

NOTES TO THE FINANCIAL STATEMENTS UNDER UK GAAP

for the year ended 31 March 2006

(h)

(i)

(j)

All of the above loans are unsecured.

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INDEPENDENT AUDITORS REPORT

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to the Members of Mountview Estates P.L.C.

We have audited the parent Company financial statements of Mountview Estates P.L.C. for the year ended
31 March 2006 which comprise the principal accounting policies, the balance sheet and notes from 1 to 12. These
parent Company financial statements have been prepared under the accounting policies set out therein. We have
also audited the information in the Directors’ Remuneration Report that is described as having been audited.

We have reported separately on the Group financial statements of Mountview Estates P.L.C. for the year
ended 31 March 2006.

This report is made solely to the Company’s members, as a body, in accordance with Section 235 of the
Companies Act 1985. Our audit work has been undertaken so that we might state to the Company’s members
those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and
the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS

The Directors’ responsibilities for preparing the Annual Report, the Directors’ Remuneration Report and
the parent Company financial statements in accordance with United Kingdom law and Accounting
Standards (United Kingdom Generally Accepted Accounting Practice) are set out in the Statement of
Directors’ Responsibilities.

Our responsibility is to audit the parent company financial statements and the part of the Directors’
Remuneration Report to be audited in accordance with relevant legal and regulatory requirements and
International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the parent Company financial statements give a true and fair view,
and whether the parent Company financial statements and the part of the Directors’ Remuneration Report to
be audited have been properly prepared in accordance with the Companies Act 1985, and whether the
information given in the Directors’ Report is consistent with the financial statements. We also report to you if,
in our opinion, the Company has not kept proper accounting records, if we have not received all the
information and explanations we require for our audit, or if information specified by law regarding directors’
remuneration and other transactions is not disclosed.

We read other information contained in the Annual Report and consider whether it is consistent with the
audited parent Company financial statements. The other information comprises only the Directors’ Report,
the unaudited part of the Directors’ Remuneration Report, the Chairman’s Statement, the Review of
Operations and the Corporate Governance statement. We consider the implications for our report if we
become aware of any apparent misstatements or material inconsistencies with the parent Company financial
statements. Our responsibilities do not extend to any other information.

BASIS OF AUDIT OPINION

We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts
and disclosures in the parent Company financial statements and the part of the Directors’ Remuneration Report
to be audited. It also includes an assessment of the significant estimates and judgements made by the directors
in the preparation of the parent Company financial statements, and of whether the accounting policies are
appropriate to the Company’s circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered
necessary in order to provide us with sufficient evidence to give reasonable assurance that the parent Company
financial statements and the part of the Directors’ Remuneration Report to be audited are free from material
misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated
the overall adequacy of the presentation of information in the parent Company financial statements and the part
of the Directors‘ Remuneration Report to be audited.

OPINION

In our opinion:

• the parent Company financial statements give a true and fair view, in accordance with United Kingdom

Generally Accepted Accounting Practice, of the state of the Company’s affairs as at 31 March 2006;

• the parent Company financial statements and the part of the Directors’ Remuneration Report to be audited

have been properly prepared in accordance with the Companies Act 1985; and

• the information given in the Directors’ Report is consistent with the financial statements for the year ended

31 March 2006.

GRANT THORNTON UK LLP
Registered Auditors
Chartered Accountants
London

18 July 2006

TABLE OF COMPARATIVE FIGURES

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as at 31 March 2006

UK GAAP UK GAAP UK GAAP UK GAAP
2004
£000

2001
£000

2002
£000

2003
£000

IFRS
2005
£000

IFRS
2006
£000

Revenue

36,493

40,289

45,997

55,087

48,778

47,456

Profit before taxation

20,008

20,075

23,603

28,593

24,848

22,660

Taxation

6,008

6,013

7,878

8,584

7,482

6,738

Profit after taxation

14,000

14,062

15,725

20,009

17,366

15,922

Dividend in relation
to the year

3,578

3,275

3,587

4,757

4,754

5,068*

Earnings per share

305.2p

325.1p

403.3p

513.2p

445.4p

408.4p

Rate of dividend

78p

84p

92p

122p

126p

130p

*The £5.068 million dividend in relation to 2006 is made up of the interim dividend of £1.715
million and the final dividend of £3.353 million which will be paid on 21 August 2006.

NOTICE OF MEETING

Notice is hereby given that the Sixty-Ninth Annual General Meeting of the Members of Mountview
Estates P.L.C. will be held at the Kenilworth Hotel, Great Russell Street, London WC1B 3LB on
Wednesday 16 August 2006 at 11.30 a.m., for the following purposes:

To receive and consider the Reports of the Directors and the Auditors and the audited
Statements of Accounts for the year ended 31 March 2006.

To declare a dividend of 86p per share payable on 21 August 2006 to Shareholders on the
register at 21 July 2006.

To re-appoint Mr. C. Maunder Taylor as a Director of the Company.

To re-appoint Mr. J.P. Hall as a Director of the Company.

To approve the Directors’ Remuneration Report set out in the Annual Report and Accounts
for the year ended 31 March 2006.

To re-appoint Messrs. Grant Thornton UK LLP as Auditors of the Company and to authorise
the Directors to determine the Auditors’ remuneration for the ensuing year.

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By Order of the Board
M. M. BRAY
Secretary

Mountview House
151 High Street
Southgate
London N14 6EW
21 July 2006

Notes:–

A Member who is entitled to attend and vote at the Meeting is entitled to appoint a Proxy to attend and, on a poll,
vote instead of him/her. A Proxy need not also be a Member of the Company.

A form of Proxy is enclosed with this Report and Accounts and should be completed in accordance with the
instructions contained therein.

Copies of the Directors’ service contracts are available for inspection at the registered office at Mountview House,
151 High Street, Southgate, London N14 6EW during normal business hours on weekdays from the date of this
notice until the conclusion of the Meeting. The register of Directors’ interests kept by the Company under the
Companies Act 1985 Section 325 will be available for inspection at the Meeting.

SHAREHOLDERS’ INFORMATION

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FINANCIAL CALENDAR 2006

Final dividend record date

21 July

Annual Report Posted to Shareholders

21 July

Annual General Meeting

Final dividend payment

Interim Results

16 August

21 August

30 November

SHAREHOLDERS’ ENQUIRIES

All administrative enquiries relating to shareholdings should be addressed to the
Company’s registrars:

Capita Registrars
Bourne House
34 Beckenham Road
Beckenham
Kent BR3 4TU